Carbon credits turn to debt

Cate Stuart at Mount Morris

From the Australian

THE boxes are packed, the last of the cattle have been rounded up and the ute is loaded with chairs, saddles and tools.

Cate and Mark Stuart will be evicted from their historic Charleville cattle station, Mount Morris, on Thursday after rural lender Rabobank last year called in the receivers Ferrier Hodgson to ­recoup an outstanding debt of $2.6 million.

The Stuarts are heartbroken. But the tough outback family, which has run the 20,000ha far-west Queensland spread for the past six years, isn’t going without a fight. A very modern fight.

They say the bank has failed to recognise their wild and sprawling home is more than just a cattle farm: it is a carbon bank.

For the past four years, the ­Stuarts have worked with the specialist carbon farming company Australian Carbon Traders to capture and store carbon on 5000ha of their mulga tree ­reserves.

They planned to earn up to $400,000 every three years in valuable carbon credit payments.

But the bank is blocking the carbon-storage scheme’s go-ahead on Mount Morris, even though the Stuarts say the project is eligible for verified credits under the federal government’s Carbon Farming Initiative.

Rabobank says the problem with carbon farming is that it ties up farmland for too long.

In emails sent to the Stuarts, the bank states that it views the stored carbon mulga reserves, set aside for 100 years under federal government rules, as effectively a liability if the property was to be sold in the future. The bank does not see the carbon as an asset.

It’s an issue that goes to the heart of the Abbott government’s commitment to direct action as the best way to tackle climate change. The Carbon Farming Initiative is designed to benefit farmers and sequester carbon in soils and trees to cut carbon in the atmosphere.

For Cate Stuart, it is a situation that would be ludicrous — if it were not so tragic. “Here we are trying to do the right thing and store carbon in our mulga trees under the CFI, which is just what the Liberal Party, the Nationals, Labor and the Greens all say we should be doing, and the banks aren’t letting us do it,” she says.

“All we were trying to do is diversify our own income stream using mulga reserves on the property to store carbon, while at the same time looking after the land; instead we get thrown off our farm and our whole family is broken up.”

She sees Rabobank is doubly liable for their current financial woes. Not only did the bank refuse to give its approval to allow the mulga reserve scheme to go ahead on Mount Morris, but it also then blocked recognition of any potential income from carbon credits in its assessment of the farm’s financial viability.

Australian Carbon Traders chief executive Ben Keogh says the problem is being experienced by farmers across Australia. “This is a perfectly legitimate way of farming and an alternate land use that is a perfect fit for farmers in many of Australia’s drier zones,” says Mr Keogh.

“But the banks don’t see carbon farming as a serious way of earning income; they don’t think carbon credits will ever happen and so they don’t allow the systems to be proven and legitimised on properties where they hold a mortgage.”

Rabobank’s country banking chief, Peter Knoblanche, denies that his bank has any policy categorically opposed to all carbon farming projects on rural properties. While he did not know the specifics of the Mount Morris case, such carbon storage schemes were difficult for banks to handle. “It’s an interesting and complex topic and each proposal is different; but because land is often locked up under these schemes for such long periods of time, like the current 100-year rule, it does have the potential to restrict the other uses the land might be put to by future buyers if the farm is sold.”

The Australian Bankers Association recently held talks with the federal government to voice its concerns about the impact of carbon farming on farm valuations and long-term viability.

A spokesman for federal Environment Minister Greg Hunt said the government was establishing a 25-year option in addition to the current 100-year carbon farming rule. “This should significantly deal with some of the restrictions created by Labor’s insistence on an unrealistic 100-year requirement (for verified carbon storage projects),” the spokesman said.

Mr Keogh says the scale of the mulga tree carbon storage possible on Mount Morris is immense. In the past three years, the 5000ha of the Stuart’s mulga scrub regenerated to produce an extra four tonnes per hectare of timber or stored carbon.

At current rates of $20 a tonne, the price is current until February next year. Under previous government rules, the Stuarts were in line for a windfall of $400,000 in their first payment — if their bank had agreed to the project being formalised. Instead, project approvals are so limited that just 4.7 million credits worth $9.4m have been generated under the government’s vaunted Carbon Farming Initiative so far, to be sold back into the Emissions Reduction Fund.

Cate Stuart says all the excitement about carbon farming is now little solace for her family. With growing healthy mulga trees on her farm, but no carbon payment cheques flowing in, the receivers drove up her front drive last month, asking for the farm keys.

“We have tried to do the right thing and be good stewards of the land; instead we have lost everything we owned.”